“They proposed to partners to extend the existing contract”: how were the gas negotiations with the participation of Russia, Ukraine and the EU

Russia has proposed Ukraine to temporarily extend the current gas transit contract, Energy Minister Alexander Novak said following tripartite consultations with Kiev and Brussels.

Novak urged to build on whether Ukrainian legislation will be finalized taking into account European standards by the beginning of 2020. Recall, on the eve of the Ukrainian Cabinet announced its intention to create a separate company to manage the gas transportation system of Ukraine, as required by European law.

In particular, the Third Energy Package, which has been in force in the European Union since 2009, prescribes that one company is prohibited from using all the gas pipeline’s capacities. At least 50% of the volume must remain available to competing suppliers.

“Our position is that if European legislation by January 1, 2020 is really implemented in Ukrainian legislation, we are ready to work in accordance with European legislation,” he said during a press-approach.

He explained that Russia is ready from January 1, 2020 to “reserve capacities”. At the same time, he noted that risks remain, that by this time Kiev will not have adopted the necessary laws and regulations, and operator certification will not take place, which must be carried out by an independent European body.

Novak noted that in connection with this, it was proposed, if this is not done before the end of January 1, 2020, to extend the existing contract. Recall that the current contract for the transit of Russian gas, concluded ten years ago, expires on December 31, 2019.

“We proposed to our partners and colleagues, if this is not done before January 1, 2020, to extend the existing contract or sign an additional agreement until the regulatory framework and the legislation of Ukraine are really ready,” the minister explained.

At the same time, he spoke positively about the progress of the negotiations. Novak noted that the conversation was constructive.

“We discussed a lot of issues, and specific issues related primarily to gas supplies to Ukraine. We believe that this is a very important issue in order to talk about gas transit and the volumes that will be from 2020, ”said the head of the Ministry of Energy of Russia.

According to him, the topic of regulation of relations in the Stockholm arbitration and those decisions that were adopted by the Stockholm court were also discussed.

“In general, I want to repeat once again: it was very constructive. We heard from our Ukrainian partners an interest in continuing work from January 1, 2020, ”he added.

Commenting on gas negotiations, the State Duma noted that the energy market should not be subject to politicization. This was in an interview with RT the first deputy chairman of the State Duma committee on energy Igor Ananskikh.

“Russia ... always said that since these are market products, there should be market relations, there should be no political demands and discussions in this connection. Of course, it is very pleasing that the new leadership of Ukraine is beginning to understand that in no way can market and political relations be dependent, ”the deputy said.

He added that the Russian side “has always been in favor of continuing to work on finding a solution that will be beneficial both for Russia and Ukraine for financial interests.”

“The balance of interests must be restored”

According to Novak, during a meeting with representatives of Kiev and Brussels, only legal issues were discussed, and not specific volumes of gas pumped through Ukraine. The parties intend to continue consultations in a month.

In turn, the head of Gazprom Alexey Miller, who was also present at the meeting, expressed the opinion that the consultations were about an exchange of views, and not about reaching an agreement.

“Today, another round of inter-ministerial consultations has passed. Therefore, it was not a matter of any agreements, it was an exchange of views, on the approaches of the parties to certain issues, ”Miller said on the Russia 24 television channel.

He noted the importance of discussing the Stockholm arbitration. Recall that in 2018, the Stockholm arbitration court partially satisfied the claims of Kiev, obliging Gazprom to pay $ 4.673 billion. However, the Russian company had previously won a lawsuit against Naftogaz, as a result of which part of the counterclaims were offset. Thus, the “debt” of the Russian side to Ukrainian partners amounted to $ 2.56 billion.

“For our part, from the Russian side, we should note that we have once again raised the question of Stockholm, this is a very important issue for us. The balance of interests of the parties in the transit contract and in the gas supply contract should be restored, ”Miller said.

• Head of Naftogaz Andrey Kobolev and Minister of Energy and Environmental Protection of Ukraine Alexey Orzhel at trilateral gas transit talks in Brussels
• Reuters
• © Yves Herman / Reuters

The head of Gazprom expressed the opinion that the primary importance in the negotiations is not the volume of transit through the gas transportation system of Ukraine, but the potential volumes of gas purchase for the domestic market of the country.

“The operation of the gas transmission system of Ukraine also depends on this, what capacities Gazprom will have to reserve from our Russian side, from the entrance to the territory of Ukraine, and the economy, including transit through the territory of Ukraine, also depends on it,” - said Miller.

In turn, the Ukrainian side stated that it does not allow the likelihood of not signing a new transit contract with Gazprom. Representatives of Kiev also positively evaluated the negotiations.

“We do not allow such an option as non-signing of the contract. - said the Minister of Energy and Environmental Protection of Ukraine Oleksiy Orzhel. “The parties should move towards each other as much as possible.” His words are quoted by TASS.

At the same time, he clarified that he sees a “definite positive”, but the risk for disrupting agreements with Gazprom remains.

In this case, which, according to Orzhel, “is not right for Ukrainian consumers and for the transport company,” Kiev plans to ensure supplies from reserves from underground gas storages.

The Ukrainian Naftogaz noted in a statement following the meeting the Russian side’s interest in "constructive negotiations and a new level of readiness to adopt modern conditions for gas transportation through the Ukrainian gas transportation system."

“In particular, Gazprom for the first time allowed the opportunity to work according to European rules from January 1, 2020, if they are fully implemented in Ukraine before the end of this year,” the Ukrainian company said.

We add that the vice president of the European Commission Marosh Shefchovich, who participated in the meeting, expressed the point of view according to which the priorities of Russia and Ukraine were different during the discussion.

At the same time, he noted that the negotiations were held in a “positive atmosphere” and there was a “rapprochement of the positions of the parties”.

“For the Ukrainian side, the most important thing is a well-functioning transit and its volumes to European consumers. The Russian side emphasized direct deliveries of Russian gas to Ukrainian consumers, ”Interfax-Ukraine quoted him as saying.

In an interview with RT, Ukrainian political scientist and economist Alexander Dudchak expressed the opinion that both Russia and Ukraine are interested in reaching an agreement.

“One can only welcome the fact of the meeting and negotiations. There is little time left to settle all the nuances, but you can still catch it before the end of the current contract, ”the expert said.

According to him, there is a search for compromises and "both sides are on the right track."

“It could be assumed in advance that transit through Ukraine will not stop. It is Kiev that is most interested in extending the contract, ”he concluded.